Using Blockchain in Warehouse Operations

Since the rise of Bitcoin, the term “blockchain” has become more prominent in the commercial lexicon. Recently, the phrase was used in reference to how warehouses operate. In this guide, learn about blockchain—what it is and how it can be used to optimize warehouse inventory management.

What is Blockchain?

The popular definition of blockchain is “a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity.” Each “block” of data is secured and bound to each other using cryptographic principles that form a “chain.” A blockchain network has no central authority because it is technically a shared ledger. The information contained in a blockchain network can be seen by anyone, which means it is completely transparent. As a result, everyone involved in the network is accountable for his or her actions.

Blockchain is a simple, automated and safe way to pass information from point A to point B. On one end, the party creating a block initiates the transaction. The block is then verified by thousands, or even millions, of computers spread across the internet. Once verified, the block is added to a chain, which is stored across the network, creating a unique record with a unique history that is decentralized and distributed. From this point, it would be virtually impossible for hackers to falsify a single record because they would need to access and alter the data on all linked computers at precisely the same time.

The allure of blockchain is that it maximizes accessibility, security and accountability. It not only allows the user to transfer and store money, it can also replace all processes and business models that rely on charging a fee because blockchain transactions are free.


Blockchain Inventory Management

Although blockchain wasn’t initially designed to help warehouses improve and optimize inventory management, the technology is adept at both of these tasks. Blockchain allows warehouses, manufacturers, suppliers and production sites, distribution centers and retail partners to connect to each other through a permanent record of every transaction that takes place. All the records are then stored and accessible to everyone within the network.

With such transparency, manufacturers are better able to manage product origins, traceability, potential recalls and perishable goods. Manufacturers can actually see consumer-level demand in real time, allowing them to forecast demand accurately and plan manufacturing and replenishment.
Before blockchain, inventory management was based on a reactive model, where replenishments were ordered once inventory was depleted, or a predictive model that estimated when inventory would run out.

With blockchain, warehouse inventory management can forecast demand accurately and thereby always have the right type and quantity of stock needed to meet expected demand. The technology makes it possible to optimize revenue and profitability, while reducing the risk of lost sales.

Blockchain in Warehouse Operations

Blockchain is still in its infancy, especially in the world of warehouse operations, but the promise it holds for the industry can’t be denied. It has the potential to change everything from inventory management to transportation tracking to logistics. By using the blockchain for data authentication, the entire supply chain can contribute and validate data, knowing the data is not susceptible to tampering.